2013-12-30 22:18
Ssangyong files for court receivership
Choi Kyong-ae
Ssangyong Engineering & Construction (E&C) has filed for court protection as its creditors refused to finance the cash-strapped builder, the Seoul-based company said Monday.
Ssangyong E&C said it held a board meeting Monday afternoon to ask the Seoul Central District Court to lead a debt-rescheduling program after one of its major creditors, the Military Mutual Aid Association, raised an objection to additional financial support to it.
“We have tried to trim off project financing-related debts in recent years but still run with about 500 billion won ($475 million) in outstanding debts,” Ssangyong E&C spokesman Choi Seh-young said by telephone.
Ssangyong became the first Korean builder which filed for court protection since the 1998 financial crisis that severely hit the construction sector. Back then, major contractors such as Hyundai Engineering & Construction and Daewoo Engineering & Construction went through a debt workout program.
Ssangyong, the country’s 14th-biggest construction firm in terms of a combination of sales and orders, once marked 1.8 trillion won in debts involving project financing, according to the company.
Its filing for court receivership may have an impact on the company’s ongoing construction projects at home and abroad. Ssangyong earns 40 percent of its overall sales from overseas markets, largely in Southeast Asia. At home, some 1,400 subcontractors are facing liquidity problems due to delayed payments for construction equipment and materials.
“We have decided to file for court protection as the second-best option, though not the best option, in order to keep overseas projects unscathed from what’s taking place in Korea,” said Choi. “We will make an utmost effort to ensure our ongoing and upcoming overseas projects will not be interrupted by our local liquidity woes.”
Ssangyong E&C will be delisted from the Korea Exchange in March when its 2013 fiscal year ends, he said.
Despite the planned delisting, the entity may have a lifeline from its creditors led by Woori Bank next year.
Shim Sang-weon, general manager of Woori Bank’s corporate restoration department, said the biggest creditor may consider extending a loan to Ssangyong’s overseas projects “if the court asks us (Woori Bank) to give a helping hand to Ssangyong.”
The company has inked net losses in the past three consecutive years as one-off costs involving the project financing were priced in its bottom line. It posted 700 billion won in combined net losses from 2011 to 2013. Its yearly order book fell to 1 trillion won from 2.5 trillion won during the same period.
Woori Bank owns a 27 percent stake in Ssangyong, followed by the state-run Korea Development Bank with 17 percent, Seoul Guarantee Insurance with 17 percent, Shinhan Bank with 13 percent and Kookmin Bank with 8.9 percent.
Ssangyong entered a workout program in June after it failed to receive payments involving local construction projects from developers.
“For us, what is badly needed is regaining credibility by completing the debt-rescheduling plan,” Choi said.
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